Your Credit Score #3

The first two articles in this five-part series on what makes up your FICO® credit score dissected the two most important score pieces: payment history (35%) and credit utilization (30%). If you get those two right, you’ve handled nearly two-thirds of your credit score!

The third most important piece of your score is called “age of credit,” or length of credit history, accounting for 15% of your score.

What Is Age of Credit?

How many years have you had credit accounts? The more years you’ve had credit the better, with respect to your credit score.

But FICO says that “even people who have not been using credit long may get high FICO® scores, depending on how the rest of the credit report looks.”

FICO’s top secret formula looks at the ages of your oldest account, your newest account, and the average age of all your accounts.

What Can You Do to Manage Age of Credit?

If you haven’t had a credit account for long, don’t throw up your hands and think there’s nothing you can do, except patiently wait, for the age of credit piece of your credit score to improve.

FICO recommends that if you’re new to the wonderful world of credit, don’t open a lot of new accounts in a short time.

For anybody, opening a new credit account will lower your average account age, which will ding your score, more or less depending on how much other credit information is on your credit report.

Similarly, closing your oldest credit account may also reduce your score a bit, both because your average account age will drop and your credit utilization will also go up, unless you pay off a chunk of your debt! But FICO’s smart enough to also take into account how long it’s been since you used certain credit accounts. Closing an old account you haven’t used in a long while may not make a big difference in your score.

NEXT: The Mix of Credit score element!

For everything you need to know about managing your FICO credit score, read the Tips sections beginning on page 8 of this free download:

Tweeters of the world, unite!

Best Way to Repay Debt

I recommend the nonprofit, registered charitable organization Consolidated Credit Counselling Services of Canada for help to Canadians with budgeting and repaying debt. For a free review of your situation, call 1-844-257-5848 or visit this website.